Harper Seeks to Build Keystone XL Support on U.S. VisitAndrew Mayeda and Theophilos Argitis
Prime Minister Stephen Harper is seeking to counter opposition to TransCanada Corp.’s Keystone XL pipeline, a project crucial for boosting Canada’s economy and Harper’s plans to make the country an energy superpower to rival Saudi Arabia.
Harper, at an event today moderated by former U.S. Treasury Secretary Robert Rubin for the Council on Foreign Relations in New York, said there is a strong case for the U.S. government to approve the pipeline, citing the prospects for job creation and North American energy independence.
“All the facts are overwhelmingly on the side of approval,” Harper said. “I know the administration will do a thorough analysis before arriving at the right decision.”
President Barack Obama’s administration is weighing whether the pipeline is in the U.S. national interest amid calls from environmental groups to kill it. The pipeline would help ease a glut of Canadian crude that the Bank of Canada says is crimping economic growth, as well as depressing prices for producers and cutting government revenue.
Today’s visit by Harper follows Canadian cabinet ministers and provincial premiers to the U.S. to lobby for the $5.3 billion project.
“For the administration to say no to Keystone would seriously undermine the goodwill between the two governments,” said John Manley, a former Canadian finance minister who is now head of the Ottawa-based Canadian Council of Chief Executives. “This is one of the most important issues that’s out there -- not just Keystone, but the whole question of how we get a fair world price for our product.”
Harper’s visit underscores the importance of the project to Canada, which has become increasingly reliant on oil for growth and government revenue. Canada needs to add pipeline capacity because oil sands output is projected to double to about 3.8 million barrels a day by 2022, according to Alberta’s energy regulator.
Harper said the oil sands are a small part of global greenhouse gas emissions and Canada is working hard to reduce emissions further. Oil sands production from Canada will also help the U.S. reduce its dependence on energy from countries such as Venezuela and generate jobs in North America. Alternative transport methods such as rail are also more environmentally risky, Harper said.
Harper’s advocacy of Keystone XL “helps cut through the noise and misinformation” about the project, TransCanada spokesman Shawn Howard said in an e-mail yesterday.
“We appreciate the strong support from the Prime Minister, the cabinet and others who understand the importance of this project to both Canada and the United States.” Calgary-based TransCanada won’t be involved in Harper’s meetings in New York, Howard said.
The pipeline, which needs State Department approval because it crosses the U.S.-Canada border, would carry heavy crude from Alberta oil-sands fields to U.S. refineries near the Gulf of Mexico. A lack of options to transport oil-sands production has led to a discount in the price of Western Canada Select -- an oil-sands blend -- that reached a record $42.50 a barrel less than the U.S. benchmark in December. The gap was $18 a barrel yesterday.
Alberta Premier Alison Redford said Jan. 24 the province will collect C$6 billion ($5.9 billion) less revenue this year as a result of the differential. The Bank of Canada cited the glut as a factor that helped cut 0.4 percentage points from the country’s annualized growth rate in the second half of last year.
Canadian energy stocks have underperformed U.S. peers by about 13 percentage points over the last year as the price gap widened, data compiled by Bloomberg show.
Canada, which sits on the world’s third largest pool of oil reserves, has seen its economy surpassed by Brazil, Russia and India since 2006, falling to 11th among the world’s largest economies, according to International Monetary Fund data.
The additional oil production generated if Keystone is approved would boost Canadian economic output by more than $600 billion over 25 years, the Calgary-based Canadian Energy Research Institute said in a July report.
“The decision to go to talk to Americans is to say this matters a great deal to us, it is hugely economically important to us,” said Fen Hampson, director of the global security program at the Centre for International Governance Innovation, a Waterloo, Ontario-based research institute.
Crude oil is Canada’s largest export, with shipments as a share of total exports averaging 15 percent over the past 12 months, three times the level a decade ago. The country counts on exports for about one third of its economic output.
“In order to both grow output over time but also get the full benefit of the capital spending, we need greater assurance about the ability to get the oil to the right market,” said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce in Toronto.
Obama cited environmental concerns in denying TransCanada’s initial permit request for Keystone in January 2012. He’s facing pressure from Democratic Party donors such as Tom Steyer, the founder of hedge fund Farallon Capital Management LLC, to reject the pipeline. Former U.S. vice president Al Gore said oil-sands activity treats the atmosphere like an “open sewer” in an interview with the Globe and Mail this month.
Environmental groups oppose the Keystone pipeline because it would transport bitumen from Canada’s oil sands, which they say produce more greenhouse gases than conventional oil.
Activists from groups opposed to the project such as the Sierra Club and Friends of the Earth plan to picket outside the offices of the Council on Foreign Relations during Harper’s visit.
The State Department estimates that temporary construction jobs will peak at about 5,000 to 6,000 in the U.S., while the pipeline will create just 35 permanent jobs. The number of additional indirect jobs in manufacturing and other sectors will depend on how much of the steel pipe and other equipment needed for the project is made in the U.S.
From the U.S. perspective, the pipeline will deliver “relatively small” economic benefits and environmental costs in the form of higher greenhouse gas emissions, according to Michael Levi, a senior fellow at the Council on Foreign Relations and author of “The Power Surge,” which examines the fight over the future of U.S. energy policy.
Those costs and benefits would be outweighed by the damage to Canada-U.S. relations if Obama were to reject Keystone XL, Levi said.
Canadian officials may be concerned Obama will seek to assuage environmentalists by further delaying the decision, said Hampson, a move that could hurt relations between the two countries.
“This would be a tipping point in the overall bilateral relationship,” Hampson said.
The visit by Harper, who once described Keystone as a “no brainer” for U.S. policy makers, comes as Canadian governments ramp up efforts to win Keystone’s approval. Redford promoted the pipeline to Democrat and Republican lawmakers last month, her fourth trip to Washington in a year and a half, after Saskatchewan Premier Brad Wall visited in March.
Natural Resources Minister Joe Oliver met last month in Washington with officials including Secretary of the Interior Sally Jewel. The Canadian government has begun an advertising campaign to encourage the U.S. to “Go With Canada” for its energy supplies, according to Chris McCluskey, Oliver’s director of communications. Canada bought advertising in newspapers, political websites and Washington metro stations.
Harper may also seek to defend the country’s environmental record. Canada’s officials have been arguing their greenhouse gas reduction targets are in line with U.S. goals and the country has done more to rein in coal-fired electricity generation. Environment Minister Peter Kent said in a May 14 interview in Paris that Canada is “very close” to an agreement with industry on new rules to lower greenhouse-gas emissions.